RBI on Cryptocurrency in India: What does the central bank's latest circular on cryptocurrencies mean?
In a piece of good news for crypto investors, the RBI issued a clarification on cryptocurrency trade. The Reserve Bank of India (RBI) stated that the banks cannot refer to its April 2018 circular to caution their clients against trading in cryptocurrencies as it has become invalid after a Supreme Court judgement dated 4 March 2020.
“As such, in view of the order of the Hon’ble Supreme Court, the circular is no longer valid from the date of the Supreme Court judgement, and therefore cannot be cited or quoted from,” the RBI statement said.
The clarification comes after several banks such as SBI and HDFC cautioned their customers against dealing in cryptocurrencies such as Bitcoin, Dogecoin, and Ethereum citing the April 2018 circular of RBI.
Recently, crypto investors have received mails from their respective banks to clarify the nature of the transactions related to cryptocurrencies and were cautioned about the risks associated with crypto and virtual currencies. The mail further mentioned that the failure to clarify the nature of the aforementioned transactions may lead to the permanent closure of bank accounts and suspension of credit cards.
What does the RBI's circular on cryptocurrencies mean?
The clarification issued by the RBI, which is developing its own digital currency, is expected to give some relief to the investors. People are now hoping that the banks will provide access to Indian crypto exchanges and their money won't be blocked.
Due to vague and grey cryptocurrency regulations in India, most banks and other regulated entities started disassociating themselves with cryptocurrency exchanges such as Coin DCX, CoinSwitch and WazirX. Crypto investors were unable to deposit or withdraw money from their bank accounts on these exchanges.
Many investors were complaining about long delays and the inability to deposit money in time on these exchanges, which in turn, led them to miss the market dips.
It is to be noted that the market dips are generally considered a good time to invest in cryptocurrencies.
Amid a blurry cryptocurrency landscape in India, RBI's statement is another indication that the government is looking to soften its stance on cryptocurrency trade and go for regulation rather than a ban.
According to RBI, banks and other regulated entities may continue to carry out customer due diligence processes in accordance with regulations governing standards for Know Your Customer (KYC), Anti-Money Laundering (AML), Combating of Financing of Terrorism (CFT), amongst others.